The United Kingdom announced aspirations in April to become a crypto center and legalize stablecoin transfers. Following last week’s events, many expected Her Majesty’s Treasury to put these intentions on hold, but it appears that the regulators are proceeding with their preparations. Surprisingly, despite the fact that crypto markets, including stablecoins, witnessed significant volatility last week, the department remained unfazed.
Notably, Her Majesty’s Treasury disclosed plans in April to make the United Kingdom a hub for crypto-assets and blockchain technology. In keeping with the stated aim, the Treasury Department said that the government will draft legislation to allow stablecoins to be accepted as payment for products and services in the United Kingdom.
However, given the widespread market volatility seen in the cryptocurrency market last week, many speculated that the regulator could have to reconsider its strategy. TerraUSD, a famous algorithmic stablecoin, not only lost its peg but also fell below $0.2 in a matter of days. While many believed this was a sad but predictable end for the algorithmic stablecoin, leading collateralized stablecoin Tether also lost its dollar peg, albeit by a few decimals, raising questions about the asset class’s durability.
Despite this, the UK Treasury says it would proceed with its stablecoin adoption strategy. According to the Telegraph, a Treasury spokeswoman stated that the Financial Services and Markets Bill, which was introduced in the Queen’s Speech, would include legislation to regulate stablecoins, which were used as a form of payment.
The spokesman explained that the law will support the expansion of crypto service providers in the UK while also establishing safeguards to allow individuals to use these stablecoins securely and reliably.
Furthermore, the representative stated that the government has made it apparent that certain stablecoins are not acceptable for payment purposes due to similarities with unbacked crypto assets. We will continue to watch the broader crypto asset market and are prepared to take additional regulatory action if necessary.